• Users of Financial Statements - AccountingVerse
  • Who Are the Users of Financial Statements? | Bizfluent
  • Interpretation of Financial Statements - Kaplan

The four types of financial statements are Statement of Financial Position, Income Statement, Statement of Changes in Equity, and Cash Flow Statement.

1.3 Basic Financial Statements & Users Flashcards | Quizlet

Interpretation of Financial Statements Introduction

Statement of Financial Position is the company’s financial position of an entity at any given time.
Another financial statement produced by nonprofit organizations is the Statement of Cash Flows, which is produced following the same procedures used by for-profit companies. This statement shows the inflow and outflow of cash within the organization. As shown in the sample statement below, the cash flow starts with the change in net assets – which equals the amount listed on the Statement of Activities. The changes in the balance sheet accounts are then added to this amount to derive at the total increase or decrease in cash. When this total amount is added to the cash balance at the beginning of the reporting period, you will end up with the current cash balance, which will match the amount listed on the Statement of Financial Position.

Financial statements on their own are of limited use


Lastly, to show the correlation between the two financial statements that we covered, you will notice that the ending value of each net asset fund listed on the Statement of Activities matches the same amount listed on the Statement of Financial Position.

 

Understanding Nonprofit Financial Statements


As opposed to an Income Statement which shows a profit or loss, the Statement of Activities instead shows a positive or negative change in each net asset fund. In the example above, you will see that the amount of temporarily restricted revenue collected during the reporting period was less than the expenses incurred using temporarily restricted funding (the sum of the temporarily restricted revenues is less than the amount of temporarily restricted revenue released from restrictions). Thus, there is a drop in the ending balance of the temporarily restricted net assets. Individuals used to reading for-profit financial statements typically consider this a “loss”; however, nonprofits are not in the business of making a profit (or a loss), thus this is an incorrect assumption. Instead, the financial statement is showing that the organization expended some of the net assets that were obtained in a prior financial period(s). This is not a loss but utilizing funds for their intended purpose (thus meeting the donor-imposed restrictions). If you are interested in assessing the organization’s financial stability, it is best to analyze the financial statements for the past five or so years to ascertain if the organization has been consistently utilizing its net assets and not replenishing them with additional funding as this could possibly indicate long-term instability.


In addition to segregating net assets based on restrictions, the Financial Accounting Standards Board (per Statement of Financial Accounting Standards No. 117) requests organizations to further report — either in the net assets section of the Statement of Financial Position or within the financial statement notes — any assets that are donated to the organization with “stipulations that they be used for a specified purpose, be preserved, and not be sold” (i.e., land or works of art) or assets donated with “stipulations that they be invested to provide a permanent source of income” (i.e., endowments).


Who are the users of financial statements

However, in recent years, some irregularities within lease accounting have become a critical issue when evaluating the statement of financial position of a company, especially those with a large amount of operating leases....

How can the answer be improved?

Nowadays, most investors and creditors in order to make an appropriate decision for their investment, or borrowing money to a company usually rely on the evaluation of a firm’s statement of financial position.

Introduction to Financial Accounting

This information is provided within an accounting framework to ensure neutrality, comparability and understandability for all users of financial statements.

Introducing Financial Statements | Boundless Finance

We will look into the stock and financial statements of McDonalds and their closest competitors to do a comparison and find out if brand recognition is a good indicator to whether the company is successful and to know if it is a good idea to buy stock in the McDonalds’ company....

Governmental Accounting Standards Board - GASB Home

As the statement argued, ‘Disclosure outside the financial statements is only used to manage the impressions of gullible shareholders.’ which generally means that such disclosures mislead the shareholders through manipulating their perceptions....